STEPHEN, GEORGE, 1st
Baron MOUNT STEPHEN, businessman, financier, and philanthropist; b. 5
June 1829 near Dufftown, Banffshire, Scotland, son of William Stephen, a
carpenter, and Elspet Smith, a crofter's daughter; m. first 8 March 1853
Annie Charlotte Kane (d. 1896) in Woolwich (London), and they had a
stillborn child and adopted a daughter; m. secondly 27 Nov. 1897 Gian
Tufnell (d. 1933) in Westminster (London), and they had a stillborn
child; d. 29 Nov. 1921 in Brocket Hall, Hertfordshire, England.
George Stephen was still an infant when his parents moved to Dufftown,
in Banffshire. Educated at the parish school until age 14, he worked
briefly at a local hotel and then in Aberdeen as an apprentice to a silk
merchant. In 1847 his father and sister immigrated to Montreal. The
following year Stephen moved to London, where he worked for a dry goods
firm; the remainder of his immediate family went to Montreal. Stephen
followed in 1850, after having secured employment with his cousin
William Stephen, an importer of dry goods. Within several years Stephen
had become the firm's chief buyer. After the death of his cousin in
1862, he took over the business with his youngest brother, Francis. The
rapid advance of his career was shown by his election to the Montreal
Board of Trade in July 1864. Three years later he sold the dry goods
firm to Francis and his partner, Andrew Robertson.
In 1866 Stephen had established a new firm, George Stephen and Company,
which concentrated on the sale and manufacture of woollens and other
cloths. He would also act as an agent for textile manufacturers. That
year he provided financing to Bennett Rosamond* and his brother William
for their tweed mills in Almonte, Upper Canada, and he would be among
the incorporators of the Almonte Knitting Company in 1882. By 1866 he
had met his cousin Donald Alexander Smith, a chief factor in the
Hudson's Bay Company. The two were to become partners in a myriad of
businesses and their careers and fortunes would be closely allied. One
of their first investments, in 1868, was the Paton Manufacturing Company
of Sherbrooke, a woollen mill built by Andrew Paton. In 1890 the same
partners would acquire the Quebec Worsted Company and, later, a
Sherbrooke mill from the firm of Adam Lomas and Son.
By the late 1860s and early 1870s Stephen had become one of the foremost
financiers in Montreal. In May 1869 he initiated the recapitalization of
the Montreal Rolling Mills Company, a manufacturer of nails and iron
bars. He formed a board composed of notables such as Hugh Allan, Charles
John Brydges, and Edwin Henry King. The firm would become a leading
manufacturer in Saint-Henri (Montreal). A partner in the Sun Mutual Life
Insurance Company of Montreal at its incorporation in 1871 [see Mathew
Hamilton Gault], the following year he created the Canada Cotton
Manufacturing Company, joining Allan, Smith, Bennett Rosamond, Donald
McInnes, and others in building mills in Cornwall, Ont.
In 1870 Stephen had begun to take an interest in railways, forming the
Canada Rolling Stock Company. Smith's convincing tales of the promise of
the Canadian northwest encouraged Stephen to attach his name in 1871 and
1873 to two proposals to build lines to Fort Garry (Winnipeg). Although
these projects never materialized, his involvement dispels the fable,
later circulated by railway executive Sir William Cornelius Van Horne,
that his interest in western railways had been the result of a chance
trip from Chicago to St Paul, Minn., in the late 1870s.
A director of the Bank of Montreal since 1871 and vice-president from
1873, Stephen was named president in March 1876. His presidency
coincided with a period of economic depression. Nonetheless, the bank
maintained its position as Canada's principal consumer and investment
bank. Stephen's role was partly ceremonial and partly political, but he
was often called on to take an active part in the bank's affairs,
travelling to London and New York to meet with leading financiers.
Although he was initially apolitical, Stephen occasionally spoke at
public meetings or issued trenchant statements on economic issues.
Ostensibly a free trader, as the economic depression of the 1870s
deepened he became an advocate of higher tariffs for certain products
and of duty exemptions for specialized equipment, such as that used in
textile manufacturing or railway construction. By the late 1870s he was
increasingly seen as an ally of the Conservatives. After Sir John A.
Macdonald was re-elected prime minister in 1878, textile and rolling
mills were among the industries that received favourable treatment under
the National Policy. As was the case with other businessmen of his age,
Stephen's politics closely followed his economic interests.
In 1877 Smith had introduced Stephen to James Jerome Hill, a businessman
who ran steamboats on the Red River. In August, Stephen visited the
unfinished line of the St Paul and Pacific Railroad in Minnesota that
Hill sought to purchase and complete to the Canadian border; he was
inspired by the prospects. Their meeting led to the establishment of
George Stephen and Associates, one of the most profitable partnerships
in the history of North American railways. Stephen, Smith, and Hill were
joined by Hill's steamboat partner, Norman Wolfred Kittson*. An
essential but invisible associate was John Stewart Kennedy, a New York
investment banker. The following year Stephen and his partners purchased
the line for $5,500,000 in cash and bonds. Unable to obtain financing
from London investment banks, Stephen and Smith pledged cash and
collateral for their shares, securing short-term financing from the Bank
of Montreal. The railway was renamed the St Paul, Minneapolis and
Manitoba Railroad, with Stephen as president.
In Montreal's financial community the audacious deal was controversial.
It was widely rumoured that Stephen had used his position as president
of the Bank of Montreal to obtain loans at preferred rates and with
limited collateral. The profits that the company reaped even before the
link was established to Winnipeg in December 1878 fuelled these rumours.
Stephen's railway enterprises were to be dogged by the press, which
closely examined the complicated financial structures for which he would
become renowned. He would treat the "scribblers" with contempt, but
worried incessantly about their effect on his businesses and reputation.
In the summer of 1880 Stephen began negotiations to secure the contract
to build the Canadian Pacific Railway. Using Duncan McIntyre of the
Canada Central Railway as his frontman, he sparred with Macdonald and
his minister of railways and canals, Sir Charles Tupper*, over the
terms. The final agreement provided the CPR with $25,000,000 in cash,
25,000,000 acres of land west of Winnipeg, and 713 miles of finished
railway. The CPR was given tax exemptions, relief on duties for building
materials, and a 20-year monopoly prohibiting the construction of
railways south of its line in western Canada. When the contract was
signed in Ottawa on 21 Oct. 1880, the syndicate comprised Richard
Bladworth Angus, Stephen, McIntyre, and Hill, as well as Kennedy.
Representatives of Morton, Rose and Company, the investment bank led by
former finance minister Sir John Rose*, and of Kohn-Reinach et Compagnie,
a Franco-German banking house, were also involved. Smith, who had earned
Macdonald's animosity, was left off the list, but he would be a
substantial shareholder and a valuable assistant to Stephen. The CPR was
incorporated on 16 Feb. 1881, with Stephen as president. He immediately
resigned from the board of the Bank of Montreal to dedicate himself to
Stephen miscalculated the time and effort the CPR would require; by
November 1881 he admitted it was "assuming dimensions far beyond my
calculations." He withdrew from the daily management of the Manitoba
line and recalled its vice-president, Angus, to Montreal to assist him
with CPR matters. At Hill's suggestion, he hired Van Horne to manage the
construction of three major sections. But Hill was unable to persuade
the syndicate to abandon the Lake Superior route, which he correctly
forecast would be a drag on the CPR in addition to being in direct
competition with the Manitoba railway.
The task Stephen faced, of finding additional financing, proved to be as
difficult as that of building across 2,000 miles of forest, swamp,
rivers, and mountains. The total cost was estimated at $100,000,000, of
which at least half had to be secured. Stephen proposed to finance the
CPR largely by limiting its ownership to "the smallest possible point,"
by raising money from a select group of investors, and by providing
investors with returns relative to the railway's performance. In so
doing, he adopted the model used on the Manitoba line, in which the
company would have sufficient funds to reinvest in its line and rolling
stock, thereby lowering its operating expenses and building share value.
Short-term financing was to be provided by the government grant paid on
the completion of each mile of track as well by the revenue from land
sales. Stephen's plan was to pattern land settlement along the route,
based on the experience of the Manitoba railway, where waves of
immigrants had provided the road with passengers and generated freight
traffic almost immediately. Both strategies proved to be optimistic. The
location of the CPR became the object of speculation, driving land
prices to unreasonable levels. Immigrants were not immediately attracted
to the prairies, whose fertility had long been the subject of debate.
Stephen's schemes to entice settlers from Scotland and Ireland did not
get support from the British government, and the HBC, which owned large
tracts of land, proved to be a recalcitrant partner in the settlement of
Driven by the need for revenues and an eastern terminus beyond the
designated end of the CPR at Callander, near North Bay, Ont., Stephen
dedicated much of his time to the acquisition and construction of
regional lines in Ontario and Quebec. The syndicate bought the Canada
Central in 1881, the western section of the Quebec, Montreal, Ottawa and
Occidental in 1882, and the Toronto, Grey and Bruce in 1884. To connect
Ottawa to Toronto, it built the Ontario and Quebec Railway. Stephen had
personally acquired a large interest in the Credit Valley Railway from
George Laidlaw* in 1880 and later incorporated the line into the CPR
network. The rapid expansion of the CPR into the territory controlled by
the Grand Trunk, under Joseph Hickson, led to conflict between the two
in the 1880s. Under pressure from Macdonald, the CPR and the Grand Trunk
put an end to their territorial battles in 1890.
Although Stephen showed considerable tactical skill in creating an
eastern network for the CPR, the capital it had required put increasing
demands on the syndicate's financial resources. By 1883 the syndicate
was showing signs of strain. The CPR had found few investors in the
capital markets of London and New York, so Stephen had to borrow against
his Manitoba stock and pledge his new Montreal mansion as collateral.
Finally he and Smith sold some of their shares in the Manitoba railway
in order to meet the CPR's expenses and dividend payments. Hill refused
to do the same for fear of losing majority control of the line. He had
come to the realization that the CPR would compete fiercely with his own
railway for eastbound traffic. He resigned from the CPR board in May
1883, but held on to half of his shares out of loyalty to his partners.
Kennedy also left, depressing the CPR stock yet further and making
Stephen's increasingly frantic attempts to find capital more difficult.
In the face of the looming crisis, McIntyre resigned in May 1884 and
soon after forced the other directors to buy his shares, earning
Stephen's lifelong enmity. Stephen had successfully lobbied Macdonald
for a bill to guarantee the CPR's dividend payments, due in November
1884, and pay other expenses; the legislation had passed in March. By
the beginning of 1885, Stephen, Smith, and Angus had exhausted their
collateral. They used the exposure of the Bank of Montreal to the CPR
and the threat to the security of the banking system generally as the
pretext for a second relief bill. Tupper and mp John Henry Pope* argued
convincingly in cabinet in support of the measure. The outbreak of the
North-West rebellion [see Louis Riel*] in March 1885 provided ample
evidence of the value of a transcontinental link; troops were
transported in seven days where it had taken four months in 1870 at the
time of the Red River uprising. This situation eased passage of the
bill, assented to on 20 July 1885, which provided for a new bond issue
that brought the railway enough money to stave off its creditors and
complete construction. Stephen was absent when Smith pounded home the
last spike at Craigellachie, B.C., on 7 Nov. 1885.
Whether they had held on out of obstinacy, recklessness, or pride,
Stephen, Smith, and Angus were the sole members of the original
syndicate to have stayed. The support of Macdonald and his cabinet had
proved essential and had provided a counterweight to the CPR's shaky
financial foundations. Yet Stephen refused to accept the argument that
the CPR owed its existence to the government. He dismissed any attempts
to impinge on the railway's freedom and became embroiled in a very
public battle of several years' duration with the Manitoba government of
Premier John Norquay* over the unpopular monopoly clause. Bowing to
public pressure in 1888, the CPR allowed for the construction of branch
lines south of its main line, but it wrestled a compensatory payment
from the federal government. On this and other issues, Stephen proved
himself ill-suited to public debate, his threats and condemnations
serving only to fan the flames of discontent. He resigned from the CPR's
presidency on 7 Aug. 1888, supporting the appointment of Van Horne as
his replacement. He remained a director until 1893, but thereafter
showed only sporadic interest in the railway; he reduced his holdings
substantially and even encouraged others to follow suit.
As the CPR's first president, Stephen had played politicians ably and
his indefatigable pleading had proved effective. He also deployed an
extensive network of allies, whom he secured by various means. For
instance, Pope, the influential minister, was offered advantageous
options on stock in the New Brunswick Railway (also acquired by the
CPR). When Hugh John Macdonald, son of the prime minister, announced his
move to Winnipeg to open a law office with a son of Tupper, Stephen
immediately offered $5,000 of legal business from the CPR's land
department. The extent to which Stephen had acquired the allegiance of
Macdonald and his government is hinted at in a letter he wrote to the
prime minister in 1890 in which he mentioned that he had personally
contributed more than $1,000,000 to the Conservative party since 1882.
If Stephen rued his involvement in the CPR, it was largely because of
the toll it took on his own portfolio. His liquidation of a substantial
portion of his stake in the Manitoba railway to finance the CPR made him
a poorer man than Hill. He also regretted having encouraged his
associates to invest in the CPR, knowing that the Manitoba railway was a
better opportunity. Although he had resigned the presidency of the
Manitoba board in February 1884, he nurtured lifelong affection for his
first railway venture and for its enterprising president. Hill developed
the St Paul, Minneapolis and Manitoba line into the Great Northern
Railroad and built his own transcontinental network. It remained
Stephen's principal investment and the source of most of his wealth. In
key moments in the expansion of Hill's empire Stephen would prove to be
his staunchest ally.
During the mid 1880s Stephen spent more and more time in England. By
1888 he was domiciled there. He had garnered the first of many honours
when he was made a baronet on 3 March 1886. In 1891 he was granted a
peerage and took the title Baron Mount Stephen from a peak in the Rocky
Mountains adjacent to the CPR line. Although he sat regularly in the
House of Lords, he never took part in debates or committees. He returned
to Canada infrequently, making his last trip in 1894. His support was
nonetheless sought by those pursuing higher office in Canada, such as
Lord Minto [Elliot*], who acknowledged that he owed his appointment as
governor general in 1898 to the influence of Stephen and Garnet Joseph,
Lord Wolseley*. From the 1890s onwards, Stephen delegated management of
most of his investments in Canada to his brother-in-law Robert Meighen
and his private affairs to his Canadian agent, John Turnbull. His
American affairs he left in the hands of lawyer John William Sterling.
His English investments were managed by Gaspard Farrer, a partner in
In private life Stephen was retiring. He and his first wife had adopted
as a young woman Alice Brooke, purportedly the daughter of a Vermont
clergyman. Stephen would introduce her to her husband, Henry Stafford
Northcote, and would help him secure the position of governor of Bombay.
His second wife, Gian Tufnell, 35 years his junior, had been
lady-in-waiting to the Duchess of Teck and was a close friend of her
daughter, who would become Queen Mary in 1910. The Stephens regularly
hosted members of the royal family at Brocket Hall in Hertfordshire, a
substantial home with extensive gardens, which they leased from 1893.
A tireless worker, Stephen had only one pastime, salmon fishing. In
November 1873 he had bought property at the confluence of the Causapscal
and Matapédia rivers in Quebec and acquired leases on fishing rights. He
made regular trips there and entertained business partners, friends, and
the occasional governor general. A pioneer of sport fishing in the Gaspé
peninsula, he introduced many to the sport and to the region, where he
became a benefactor. By the 1880s he was seeking other waters to fish.
In 1886 he purchased land in Grand-Métis. On a promontory overlooking
the Mitis and St Lawrence rivers he built Estevan Lodge. The house,
property, and contents cost $73,426. In 1918 he would give the estate to
his niece Elsie Reford [Meighen], who would later transform it into a
vast ornamental garden.
In 1883 Stephen had moved into the mansion he built in Montreal.
Designed by William Tutin Thomas, the house cost some $600,000. It has
been described by architectural historian Arthur John Hampson Richardson
as a "one of the real masterpieces of the [Italianate] style in Canada."
After Stephen moved to England, the residence was used by his sister
Elsie and her husband, Robert Meighen, who acquired it in 1900. It would
become the Mount Stephen Club in 1926.
One of the most generous philanthropists of his time, Stephen sought no
accolades for his gestures. Although he made ample provision for his 19
nieces and nephews and the relatives of his two wives, he directed much
of his wealth towards hospitals. In 1890 he and Smith had acquired the
Frothingham estate [see John Frothingham*] in Montreal as the site for
the Royal Victoria Hospital and they contributed $500,000 each to its
construction. After it opened in 1893, they gave an additional $500,000
each in stock to pay for the building and establish an endowment fund.
Stephen also donated a wing to the Montreal General Hospital and made
donations to hospitals in Scotland, but he reserved the bulk of his
wealth for a single charity, the Prince of Wales Hospital Fund for
London (renamed King Edward's Hospital Fund in 1907). Established in
1897, it assisted the voluntary hospitals in the greater London area.
Stephen worked closely with the Prince of Wales (later George V) in
building the endowment and was its most important benefactor. His total
gifts to it amounted to £1,315,000.
Almost completely deaf in his later years, Stephen spent much of his
time at Brocket Hall and showed a firm hand and mind until shortly
before his death in 1921. He was buried in the graveyard nearby.
Although he had given generously to hospitals, it was not because he had
had occasion to use them. Blessed with a solid constitution, he had
enjoyed remarkable health, not missing a day to illness in over 53 years
and never suffering a single headache. At the time of his death, his
estate was valued at £1,414,319. He left little to charities or causes
in Canada, believing that he had given more to this country than it had
given to him.
Unlike his partners and associates Hill, Smith, and Van Horne, Stephen
was never accorded a biography by contemporary publicists or authors.
The fact that he burned the bulk of his papers before his death and had
no children helped to make his story inaccessible. His quiet retirement
to England at age 59 had removed him from public attention and the
dizzying complexity of his financial transactions made him a less
appealing subject than his larger-than-life partners. In addition, his
reputation has risen and fallen with that of the CPR. Critics have
viewed the railway as a needless extravagance, nationalists have seen it
as essential to the creation of a transcontinental nation. Stephen
himself was ambivalent. However important he believed the CPR to be to
Canada, he was not convinced of its value as a business investment. His
withdrawal from it is sometimes interpreted as a slight to Canada and a
petulant retreat from a country that had not adequately acknowledged his
importance. In fact, he received the highest honour then awarded to a
Canadian, a peerage. His rapid withdrawal underscores that he fully
comprehended the nature of railroading, where profitability depended
more on competent managers than ambitious financiers. In Hill and Van
Horne, he was associated with two of the best on the continent.
Historian Donald Grant Creighton dubbed Stephen "perhaps the greatest
creative genius in the whole history of Canadian finance." His phrase
nicely captures the ambiguous nature of Stephen's success; creativity in
finance is often synonymous with dishonesty. Stephen and the members of
his syndicate were assailed at the time as business magnates who
manipulated politics, the press, and the financial community to their
own gain. The contrast with Stephen's view of himself could not be
starker. His gravestone carries the inscription "wise in his
benefactions, of stainless integrity." Although he used the complete
arsenal employed by financiers to cajole and convince, his chief asset
appears to have been his buoyant optimism and his power of persuasion.
His obituary in the Times (London), penned by associate Gaspard Farrer,
ascribed his success to the fact that "he had the gift of
instantaneously inspiring confidence and arousing enthusiasm and
devotion. . . . In his presence doubt and difficulties vanished and hope
and confidence revived."